The US dollar rose ahead of today's interest rate decision, amid the prospect of a US-China trade deal

The US dollar strengthened during Wednesday's trading session, recovering from a one-week low against a basket of major currencies. This was buoyed by growing optimism surrounding the imminent conclusion of a US-China trade agreement, which brought some calm to global markets and boosted investor sentiment.

Trade optimism fuels risk appetite

In a speech delivered in South Korea, US President Donald Trump stated that he expects to sign a trade agreement with his Chinese counterpart, Xi Jinping, during their upcoming meeting on Thursday. He expressed confidence in reaching a "great deal" that serves the interests of both countries.

These remarks coincided with reports from Reuters indicating that the Chinese state-owned company COFCO purchased three shipments of US soybeans this week, a clear sign of improving trade relations and the beginning of a mutual easing of restrictions.

Anticipation of the US Federal Reserve Meeting

Meanwhile, traders are awaiting the US Federal Reserve's decision, which is expected to include a 25-basis-point interest rate cut, followed by a press conference with Fed Chair Jerome Powell.

Although markets have already priced in this scenario, investors will be focused on the Fed's rhetoric and future guidance regarding monetary policy.

However, analysts do not expect the decision to have a lasting impact on the dollar's movements, especially given the reduced likelihood of any surprise moves by the central bank.

Other Central Bank Actions

The Bank of Canada is expected to announce its interest rate decision today, with expectations of a similar 25-basis-point cut. Investors are also awaiting tomorrow's meetings of the Bank of Japan and the European Central Bank, where expectations lean towards both banks maintaining their interest rates with little change.